Liar's Poker was not intended as a how-to manual.November 11, 2008 1:08 PMSubscribe

The End of the Wall Street Era. “We always asked the same question,” says Eisman. “Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.” He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number.

If real estate prices started to fall, wouldn't you just start lending more money to more people so they could enter the market, and that demand would force prices back up again?

Once you've loaned money to the whole spectrum of people, from well-paid professionals & entrepreneurs to meth-addicted trailer park trash, you could move onto lending to their pets. When the pets are mortgaged to the hilt, their fleas might be interested in buying places of their own...posted by UbuRoivas at 1:23 PM on November 11, 2008 [1 favorite]

It's kind of astonishing that this has even been mentioned. Although this was 2 months ago and so maybe things have changed since then.posted by carter at 1:38 PM on November 11, 2008 [1 favorite]

Almost a good idea Ubu, but the fleas were smart enough to jump ship long ago.posted by dances_with_sneetches at 1:38 PM on November 11, 2008

Great article. Makes me feel better about how I felt about the market back in 2006.

and feel terrible that I had neither the financial means nor wherewithal to take advantage of itposted by davejay at 1:42 PM on November 11, 2008

Funny, today I was talking to a friend of mine about the 55 trillion in CDOs. We looked at the bad mortgages, about 2% of 55 million first mortgages in the U.S., at - we guess - an average $200,000 per loan.

22 billion in bad mortgages.

700 billion - to start - bailing out Wall Street.

That’s when Eisman finally got it. Here he’d been making these side bets with Goldman Sachs and Deutsche Bank on the fate of the BBB tranche without fully understanding why those firms were so eager to make the bets. Now he saw. There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product. The firms used Eisman’s bet to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when Eisman bought a credit-default swap, he enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs. Eisman, in effect, was paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all. “They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,” Eisman says. “They were creating them out of whole cloth. One hundred times over! That’s why the losses are so much greater than the loans. But that’s when I realized they needed us to keep the machine running. I was like, This is allowed?”

This was indeed allowed. It should not have been.posted by Xoebe at 1:42 PM on November 11, 2008

Good artile. But wil smeone explain to me the crux of this article below.
How does making a short on a financial instrument allow you to create another copy of that instrument? The fact thast someone sells short implies lack of confidence in its worth.

Whatever rising anger Eisman felt was offset by the man’s genial disposition. Not only did he not mind that Eisman took a dim view of his C.D.O.’s; he saw it as a basis for friendship. “Then he said something that blew my mind,” Eisman tells me. “He says, ‘I love guys like you who short my market. Without you, I don’t have anything to buy.’ ”

That’s when Eisman finally got it. Here he’d been making these side bets with Goldman Sachs and Deutsche Bank on the fate of the BBB tranche without fully understanding why those firms were so eager to make the bets. Now he saw. There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product. The firms used Eisman’s bet to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when Eisman bought a credit-default swap, he enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs. Eisman, in effect, was paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all. “They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,” Eisman says. “They were creating them out of whole cloth. One hundred times over! That’s why the losses are so much greater than the loans. But that’s when I realized they needed us to keep the machine running. I was like, This is allowed?”posted by lalochezia at 1:43 PM on November 11, 2008

Freaking great article. Thanks for this.posted by brain_drain at 1:54 PM on November 11, 2008

How does making a short on a financial instrument allow you to create another copy of that instrument? The fact thast someone sells short implies lack of confidence in its worth.

Credit default swaps have two sides -- the person buying the risk and the person selling it. However, there is no reason (under the current law) that every reference obligation has to support only on pair of counterparties. In fact, you can buy and sell both sides of the same risk hundreds of times to hundreds of different pairs (or even not-pairs, if you want the risk yourself) or people. Each time you do so it creates a new security--the new credit default swap. That's why the CDS market so completely dwarfs the actual mortgage market.

It's easiest to think of the CDS as a bet. If you can find people who think Joe is going to default on his mortgage and people who think he isn't and match them up, then Joe only has to default once, but you can take as many pairs of bets as you like on that one event. That event (well, actually a package of Joes, each with his own crappy mortgage, some percentage of whom default) is called the "reference obligation" and the CDS is called a derivative, but it's nothing more than a way of abstracting the financial risk from the actual event so that you can sell it as many times as you want: in short, it's a bet.posted by The Bellman at 2:16 PM on November 11, 2008 [6 favorites]

How does making a short on a financial instrument allow you to create another copy of that instrument? The fact thast someone sells short implies lack of confidence in its worth.

Technically, they weren't shorting the bonds, they were buying credit default swaps on the bonds. They made a contract to make periodic payments to Deutsche Bank. In return, Deutsche Bank agreed to pay Eisman and colleagues a lump sum in the event that the bond in question defaulted.

Now, Deutsche Bank holds a contractual obligation that carries with it a regular income (structured as some percentage of the underlying debt obligation). It can bundle this with other CDS contracts and sell it on, just like it would with ordinary debt. Whoever buys it gets a regular income until the debt on which the CDS was based defaults, at which point they have an obligation to Eisman and colleagues.

So what the contract has created is kind of like a copy of the original bond, with income accruing to the whoever is on the selling end of the CDS contract and a loss that accrues should the original debt default. The banks that created the CDS contracts can sell them on to generate more capital to make more loans, but in the process they've created a side market in which any risk associated with the original debt is amplified. Should the borrower default, not only will whomever owns the original mortgage lose money, anyone who bought a CDS obligation based on the mortgage will lose money as well.posted by mr_roboto at 2:19 PM on November 11, 2008 [10 favorites]

From my very rusty knowledge of the SEC and general financial accounting laws, there are a lot of people who should be going to jail over these things.

There are people with jobs with names like "auditor", "comptroller", "risk manager" who have a legal responsibility to try as hard as they can to prevent exactly this sort of thing from happening. "The dog ate my homework" doesn't form a legal defense against this sort of thing. And the legal responsibility almost certainly projects upward to management if it could be shown that they encouraged this sort of behaviour. These are felonies, people go to jail for years for this sort of thing all the time.

It is one of the peculiarities of the market that an investment bank can basically synthesize any security they like from nothing by simply writing a contract that binds them to exactly the same cash flows as that security would emit.posted by lupus_yonderboy at 2:30 PM on November 11, 2008

It's The End of the World As We Know it (and I Feel Fine).posted by gman at 2:40 PM on November 11, 2008

Read this via Kedrosky this morning, and came to Mefi thinking about posting it. It's about the best piece of writing I've seen on the crisis, and maybe the best explanation of how things went wrong alongside the "Giant Pool Of Money" documentary. Very nicely built narrative with the paragraph Xoebe quotes as the payoff - I had a real "Oh shit - that's what a synthetic CDO is! FFS!" moment upon reading that. The bit about the retranching of the BBB-rated tranches into AAA-rated instruments was an eye opener - I'm amazed anyone believed that would work, to the point where the word "fraud" starts to raise its ugly head.posted by pascal at 3:02 PM on November 11, 2008

... an investment bank can basically synthesize any security they like from nothing by simply writing a contract that binds them to exactly the same cash flows as that security would emit.

This, like the article, makes way more sense than I'm comfortable with... Which is to say, "They're allowed to do this?"posted by From Bklyn at 3:29 PM on November 11, 2008

Man, I'd like to end an era, that'd be sweet.

So, does this mean I can't wear suspenders and slick back my hair anymore?posted by Smedleyman at 3:36 PM on November 11, 2008 [1 favorite]

This is precisely why I keep saying that the financial system has been disconnected from the economy -- because it has. We are lost in economic wishful thinking.

Trying to prop up this system is suicide; it has to fail for us to ever recover.

I realize I always get back to this, and I realize it's predictable and a bit boring for those of you who read these, but this tomfoolery would not have been possible without fiat money and Fed backing. It tried to implode multiple times, but Greenspan actively prevented it by turning on the spigots at will. To avoid short-term pain, he incurred long-term agony.

In this case, the natural destructive processes of capitalism failed, because they were hijacked by lies coming from the center of the system. Infinite liquidity on demand represented to the economy and financial system that WEALTH was unlimited, and they kept coming up with new and "better" ways to extract yet more of it, inflicting more and more damage on the real economy underneath.

The natural distress calls, the recessions that signal an excess of wealth consumption and a shortage of wealth production, were prevented from working. Alan Greenspan, by using the power of the printing press to be sure that nothing bad ever happened, made this financial apocalypse not only possible, but inevitable.

And now Congress, with its foolish, foolish bailout packages, is making it worse still. Now that we're on the bailout path, we can't get off. To avoid losing a foot today, we'll promise the ankle tomorrow. When they come for the ankle, we'll promise the knee. At no time will losing economic body parts ever be deemed acceptable, so we will make more and more and more extravagant promises until there's nothing more left to promise, and we die.... all from fear of losing a foot. (which would even regrow.... it's not like a real body!)

There are MeFites who have poopoohed these views, some at the center of this corrupt, terrible system. They LIKE this game, and they want it to continue. Trusting opinions coming from the center of this system is not a very good idea.

Yes, I believe they hitched a ride on the rats.posted by UbuRoivas at 3:59 PM on November 11, 2008

Thanks for posting this.posted by jsonic at 4:03 PM on November 11, 2008

I ♡ Michael Lewis.

The bit at the end in which he has lunch with Gutfreund? Priceless.posted by killdevil at 4:12 PM on November 11, 2008

Why is it that every day, I read about another person who saw it all coming? But that said, why is it the end if the govt is now going to bail out so many outfits under the questionable notion that this and that one, though utterly greedy and/or incompetent, need to be saved because they are too big to go under? we will now lend my money to the auto industry so they can continue to make cars that are not wanted or ought not to be wanted, and if we do not, so many jobs will crumble. But if the auto industry is screwed up--incompetent management etc--then it is only a matter of time before they do go under, or ask for more loans.
I do not see the end of Wall Street so long as we keep doing what we seem now to be doing to make sure they survive.posted by Postroad at 4:18 PM on November 11, 2008

A few simple questions from a finance n00b:

Are publicly traded financial institutions allowed to leverage any securities at 30:1 or more at their own whim, or is the degree of leverage permitted on securities controlled somehow by the risk rating?

Is it a crime/fraud to misrate securities or in any way mask the risk in a bundled security? That would seem to be common sense but I'm not hearing about people going to prison.

It seems this situation was so obviously problematic a child could figure it out, but I'm left wondering if I just don't get it because of the scale to which this has been blown up without garnering the notice of more people with the publics interest at heart (as rare as they may be in the world).posted by drpynchon at 4:25 PM on November 11, 2008 [1 favorite]

Why are foreign currencies -dropping- relative to the dollar, if this is a Wall Street mess? Did the foreign financial markets just go along with trading things like CDOs, but more of it, than even on Wall St.?posted by jet_silver at 5:02 PM on November 11, 2008

I might have said something like, “I hope that college students trying to figure out what to do with their lives will read it and decide that it’s silly to phony it up and abandon their passions to become financiers.” I hoped that some bright kid at, say, Ohio State University who really wanted to be an oceanographer would read my book, spurn the offer from Morgan Stanley, and set out to sea.

This has recently been my view. It's not like being in finance is particularly interesting or satisfying work. People seem to get into banking to simply make obscene amounts of money.

What's the 1940s story about the trader showing an investor all the yachts and tall buildings personally belonging to bankers in New York, and the stockholder says says, "Where are all the boats belonging to the investor?"

Why anyone is ever shocked that bankers are crooks, or have zero sense of altruism, is a mystery to me.posted by plexi at 5:04 PM on November 11, 2008 [1 favorite]

Oh , look, "Even as the company was pleading the federal government for another $40 billion dollars in loans, AIG sent top executives to a secret $350,000 gathering at a luxury resort in Phoenix last week."posted by plexi at 5:11 PM on November 11, 2008 [1 favorite]

Here's an idea for fixing the mortgage meltdown. Allow companies to settle CDS debts with other CDS that are owed to them.posted by delmoi at 5:19 PM on November 11, 2008

There should be an annual or semiannual Metafilter 'Cassandra' award, Malor, and you should be its first recipient-- then after a few years to give it the chance to get established in its own right, we'd undoubtedly rename it the Malor Award.posted by jamjam at 5:30 PM on November 11, 2008 [1 favorite]

Thank you bitmage. Micheal is a personal friend from a long time back and I always like to read his stuff. I had missed this before.

He has married economics and writing as well as anyone ever has. He has such an enthusiasm, when he is in the room he will energize you. He has taken that and just exploded with his writing. A ton of my friends from that time are authors, news people etc. and Mike is probably not the one we would have thought would be such an entertaining and insightful writer, and I am pretty sure that he didn't even hang out with those other successful writers, more like the bankers, but then he did start there.

I have to say, thinking about "Liar's Poker" vis a vis the current economic melt down is sobering. Some rich dork who is willing to bet a million dollars on his dollar bill just fucked our whole economy, or perhaps a few hundred of such dorks. They took a huge bet, and when they lost, we lost too. ("Let them eat cake" - chomp)posted by caddis at 5:32 PM on November 11, 2008

Oh , look, "Even as the company was pleading the federal government for another $40 billion dollars in loans, AIG sent top executives to a secret $350,000 gathering at a luxury resort in Phoenix last week."

Wow. Presumably, if they hadn't hosted that conference, they'd only need $39.9996 billion in government loans.posted by mr_roboto at 5:37 PM on November 11, 2008 [4 favorites]

Malor,
That's the thing , isn't it? All these people who were supposed to be "so smart," with their Harvard MBAs, attitude etc, turned out to be naive. And most naive of all were the idiots who worshiped said smart guys. We have a name for those idiots-- they're called business magazine journalists.posted by wuwei at 6:14 PM on November 11, 2008

Is it a crime/fraud to misrate securities or in any way mask the risk in a bundled security?

Illegal to lie? Have you seen modern-day marketing-based capitalism or politics? Deception is the American Way, with a veneer of legislated truth.

Why is it that every day, I read about another person who saw it all coming?

I think I can at least partially answer this: Because if you'd gone to some big-shot magazine's editor in '06 or '07 or probably even early '08 and pitched a piece about how the entire American finance system was about to collapse, they'd have told you that's not what their buddies working at Lehman were saying and if it was this big they'd have heard about it all over the place as they laughed you with gentle but unmistakable condescention out of the office.

All of a sudden, very recently, those pitches started to make sense to them.

Great piece, by the way. I think if I read just one more really well-written overview, I'll actually understand what the hell happened. I finally know exactly how shorting works, in any case.posted by gompa at 6:40 PM on November 11, 2008

The rating agency analysts are second-class citizens. The agencies can't pay for the kind of talent that fills (filled?) the investment banks. It's hardly surprising they couldn't keep up.posted by grobstein at 6:45 PM on November 11, 2008

Is it a crime/fraud to misrate securities or in any way mask the risk in a bundled security?

Yes, there are numerous felonies which can be described exactly this way.posted by lupus_yonderboy at 6:48 PM on November 11, 2008

Great article. I immensely enjoyed reading Liar's Poker, and I enjoyed this. I love the ending, also.posted by kisch mokusch at 7:01 PM on November 11, 2008

My operating theory for a while has been that the system was funded by those betting against its survival. In other words, every day they kept the story going on, was another day the shorters lost their shirt. This obviously wasn't the only force keeping the system alive, but I'm sure lots of people made enormous bets that the system would die in the next month, and then miraculously it stayed alive some more.

And then, if you look in this article, its there...posted by effugas at 7:24 PM on November 11, 2008

Great article.

But I still have no idea how Wall Street works. No matter how much I read my brain just wont compute.posted by AzzaMcKazza at 7:27 PM on November 11, 2008

From my very rusty knowledge of the SEC and general financial accounting laws, there are a lot of people who should be going to jail over these things.

Dibs on the movie rights to this Eisman chap. Best article I've read in weeks.posted by butterstick at 7:34 PM on November 11, 2008

My favorite paragraph:

This particular dinner was hosted by Deutsche Bank, whose head trader, Greg Lippman, was the fellow who had introduced Eisman to the subprime bond market. Eisman went and found Lippman, pointed back to his own dinner companion, and said, “I want to short him.” Lippman thought he was joking; he wasn’t. “Greg, I want to short his paper,” Eisman repeated. “Sight unseen.”posted by A dead Quaker at 7:52 PM on November 11, 2008

What a great article, bitmage.posted by LanTao at 7:54 PM on November 11, 2008

What is the purpose of these exotic derivatives? Do they serve any purpose other than the obfuscation needed for these people to get rich? Why are they allowed? Do they have any upside at all?

Unregulated markets are a beautiful thing, like mold colonies on three-week old bread. You'll never know what will evolve.posted by troy at 8:56 PM on November 11, 2008

Think of CDS as bond insurance. At the root, originally you might hold GM bond and want to insure against default, so they enter into a CDS contract and pay premium to Goldman Sachs. Goldman Sachs pays you par value of the bond if it goes into default. As with all good things, it got taken too far. Unlike normal insurance, regulation did not require Goldman Sachs to hold capital against this insurance like your homeowners insurance company has to when it insures your house. This means Goldman Sachs might not end up having money to pay when the time comes. Apparently some people in the CDS market did not take this risk seriously enough. AIG wrote a lot of CDS contracts... Central clearing for CDS and possibly regulating CDS more like insurance, which is what it actually is, would eliminate or reduce these issues.

MBS which were then packaged into CDOs allowed banks to shift risk to other parties who were interested in taking that risk. Hedge funds, pension funds, and insurance companies were some of those willing to take on that risk. Why? Because they thought the assets were offered a high yield compared to other assets of similar risk (perceived risk). When everythings going up, everybody chases yield. 3% on treasuries is no fun if you can get 4% on MBS, and house prices only go up, right?! State pensions are always buying one stupid thing or another. If it's not junk bonds its internet stocks or mortgage backed securities. I could swear I read something recently about state governments being at risk in the Panic of 1907 because they had speculated in railroad stocks... Unfortunately these pensions often blindly follow ratings agencies, who are paid to rate securities by the originator (Hey Moody's I'm going to pay you to grade my new toy, do I get an AAA or junk rating? By the way, S&P is down the street, maybe I'll see what they have anything nicer to say..).

This shifting of risk was what allowed most people who have bought homes in the last 5-10 years to have done so. I say this because historically people paid 20% down to get into their house, and paid interest on a 30 year mortgage of close to 10%. Banks would only cut you a mortgage for 3x your income or less, and were a real pain about checking all your paperwork. Most recent homebuyers could not have bought as big a house under these terms. This also explains the rapid increase in average square footage per home in the last decade.

Quick math -
500k house @ 20% down & 12% interest = 100k down & ~$4000 per month payment
Now lets try 10% down & 6% interest..
We can now buy a 760k house, with only 76k down, and the same $4000 per month

The amount of capital allocated to real estate in the last 5-10 years is astonishing. Simply put, there was more money available to more people to borrow to buy houses.

Another interesting piece of data to look at is "Net Home Equity Extraction". Pre-2000s, it was about $8B per year. 2000s-2007 that number was $800B/year. This is people taking out larger loans on their homes when its value went up. TV ads call this "tapping the equity in your home", aka- using your house as a piggy bank.

Where did the money go? Thats something like $2700 per american per year for 5+ years. Consumer spending, aka- Flat screen TVs.
It has now gone back down to $8B, this is called de-leveraging, aka- no more Flat screen TVs.

Oh and remember all those 'house flipper' reality tv shows?

Main St loves Wall St on the way up..
It's on the way down that they have some complaints.posted by gomess at 9:07 PM on November 11, 2008 [8 favorites]

This has recently been my view. It's not like being in finance is particularly interesting or satisfying work. People seem to get into banking to simply make obscene amounts of money.

This is not strictly true, there are a lot of people who really do enjoy it.posted by atrazine at 9:14 PM on November 11, 2008

Let me add this 1 year link with a pretty chart on home equity extraction.

"The pace of mortgage equity withdrawal is likely to cool, but not fall off a cliff – resulting in a moderate drag on consumer spending growth over the next few quarters."
Turned out to be hilariously wrong.

A more recent piece here, illustrating the actual 2008 cliff scenario which has occurred.

From the article, a simple sentence most of the US population fails to understand-
For one, borrowing money to buy an asset is an inherently risky enterprise: "borrowing to buy a home is like buying stocks on margin: if the market value of the house falls, the buyer can easily lose his or her entire stake."

Great article. Reading it is a bit like watching someone slowly kill himself, though. I wasn't sure whether regulation is the long-term answer to our economic crisis, but now I really think it is.

The junior associates, managers, and CEOs just didn't know what they were doing and they didn't want to know. The lenders knew what they were doing was nonsense, but it sold, so who cares? It seems like Deutsche Bank had some idea that the leveraging was on thin ice, but they wanted to get in while the gettin' was good.

If their incentives are only to make more money, then our incentives have to be to make sure they stay in line. Otherwise, they'll eat more and more until all the food is gone and then starve to death.posted by Grimp0teuthis at 10:58 PM on November 11, 2008

From the article, a simple sentence most of the US population fails to understand-
For one, borrowing money to buy an asset is an inherently risky enterprise: "borrowing to buy a home is like buying stocks on margin: if the market value of the house falls, the buyer can easily lose his or her entire stake."

Leveraged speculation.

If my stocks lose value I have lost money. If my house loses value I still have the same house I had before. So long as I can still afford the repayments (if I have a regular job and a 30 year fixed rate mortgage one would assume this is true) I still have the same house.

What snarky little investment types fail to understand is that people buy houses because they need a place to live. It's only a risky enterprise if you want to use the increased equity in your property as an ATM machine. The rest of us just want to pay the mortgage and paint our picket fence.posted by Talez at 11:14 PM on November 11, 2008 [4 favorites]

This also explains the rapid increase in average square footage per home in the last decade.

I'd argue that the capital cost of the building is dwarfed by the cost rises of the land component of housing prices for this up-cycle.

This shifting of risk was what allowed most people who have bought homes in the last 5-10 years to have done so.

I think there's a great disconnect about what the real estate market really is. As Churchill described it, Land is the mother of all monopolies. IMO, it is the source -- and the sink -- of all wealth.

Since the supply of land is fixed, in any area with a non-decreasing population any increase in purchasing power -- whether it be via higher take-home pay (via wage growth or tax cuts), lower interest rates, implicit or explicit liberalization of debt-to-income guidelines, or even suicide lending via ARMs and neg-am offerings -- this increased purchasing power will push up land prices concomitantly.

So we COULD turn back the clock to 1970 -- only qualify borrowers on ONE income (not both) require 20% down, charge 10% interest, get rid of the mortgage interest deduction, jack taxes up to 40% on middle class earners, require 15 or 20 year amortization -- and in the end, prices would HAVE to come down to market-clearing -- levels.

Here in Sunnyvale in 1970, houses were going for $30,000. If the lending environment was like the above paragraph, houses would probably cost $160,000, which is $30,000 in today's money.posted by troy at 11:14 PM on November 11, 2008 [3 favorites]

If my stocks lose value I have lost money. If my house loses value I still have the same house I had before. So long as I can still afford the repayments (if I have a regular job and a 30 year fixed rate mortgage one would assume this is true) I still have the same house.

Thats right, and fine for the people who actually bought their homes to live in for the long term.

Unfortunately if you look at the numbers, there were a lot of people who-
1) Used their homes as piggy banks to buy consumer goods, or second homes
2) Flipped homes to use the home equity to trade up to bigger and bigger homes
3) Used ARMs to have really low rates for 3-5 years which then reset to higher rates, at which time they planned to refinance or sell
4) Used the home as a rental property

The people doing any of the above were speculating, and there were a lot of people doing so.

I think I knew the game was over when I was at a party, and this couple was talking about their real estate investments. Two kids in their 20s, live at home with their parents, and yet each of them owned 1-2 pieces of real estate that they were renting out.

People who bought their homes to live in it should be upset by all of the above behavior, not just 'snarky wall st types', because that is what pushed up prices. Real estate can't and shouldn't appreciate in price faster than wages, inflation and stocks. Eventually new home buyers are priced out and the ponzi scheme ends.posted by gomess at 5:04 AM on November 12, 2008 [1 favorite]

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